How to find the best pool loan for your needs
There may be nothing better in the summer months than having a backyard pool. Unfortunately, installing an in-ground swimming pool costs over $50,000 on average.
What are your options if you don’t have enough cash? Is swimming pool financing available? Thankfully, yes. There are plenty of ways to pay for a swimming pool. Here are the best pool financing options to consider this year.
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What is a pool loan?
A pool loan is a type of loan that is specifically designed to help finance the construction or installation of a swimming pool or spa. These loans are typically unsecured, meaning they do not require any collateral. They are often offered with fixed interest rates and repayment terms ranging from a few years to several decades.
Pool loans can be used to cover the cost of a variety of pool-related expenses, such as excavation, landscaping, pool equipment, and installation costs. A new swimming pool can increase your property value by upwards of 7%, according to a HouseLogic study. But installing one of your own comes with a hefty price tag. This is why many homeowners opt for pool loans to build their backyard oasis.
Some pool loans may be offered by traditional banks or credit unions, while others may be available through specialized lenders that focus specifically on pool financing. The amount you can borrow will depend on several factors, including your credit score, income, and the overall cost of your pool project.
Pool financing options
If you don’t have cash on hand to install a pool, there are a variety of financing options that can help.
Pool financing options include:
- Cash-out refinance on your home
- Home equity line of credit (HELOC)
- Home equity loan
- Personal loan or “pool loan”
The right type of pool financing for you depends on a variety of factors, like your existing home equity, your credit score, and how much cash you need. Here’s what you should know about each option.
1. Cash-out refinance to pay for a pool
Refinancing is the process of replacing your current mortgage with a new one. You can often refinance to get a lower interest rate and reduce your monthly payment.
Depending on how much home equity you have, you may be able to get cash back when you refinance. You can use the cash for just about any purpose, like debt consolidation, home improvement financing — and yes, even building a swimming pool.
Pros of a cash-out refinance
The benefit of a cash-out refinance is that you’re able to borrow up to 80% of your home’s equity. If you’ve had the home a while, or made a big down payment, that could be plenty to finance a new swimming pool.
But cashing out isn’t the only benefit of refinancing. You can also:
- Increase or decrease your loan term
- Switch from an adjustable-rate mortgage to a fixed-rate mortgage
- Switch from one mortgage program to another
- Remove a co-borrower from the mortgage loan
- Remove mortgage insurance
If a lender offers you a low mortgage rate, cashing out might be the best option for homeowners with enough equity to build a swimming pool. If you can take cash out and drop your rate, it’s a huge win-win.
Cons of a cash-out refinance
The benefits of cashing out have to be weighed against the overall cost of refinancing.
A refinance involves going through the mortgage application and approval process again. You’ll have to submit updated income information. Your credit score must also be high enough to qualify for the chosen mortgage program.
Refinancing also involves closing costs, which range from 2% to 5% of the loan amount. And your mortgage balance increases when you borrow from your equity, which can increase your monthly payment.
Finally, remember that a new mortgage is a secured loan. This means if you can’t repay it, you could risk foreclosure. So you have to make sure cashing out your equity is a sound decision that won’t negatively impact your finances in the long run.
2. HELOC pool financing
A home equity line of credit (HELOC) is a revolving credit line secured by your home’s equity. Basically, a HELOC functions like a credit card. If you’re approved, you could access enough credit to finance your pool and then pay the money back on a drawn-out schedule.
Pros of a home equity line of credit
The advantage of a HELOC is that monthly payments are based on how much you withdraw from the account. Moreover, you only pay interest on what you borrow. The draw period is typically 10 years, so you’ll likely have access to the line of credit even after you’ve paid off the pool.
Another big benefit is that interest rates on HELOCs are lower than credit cards or personal loans, because the debt is secured by your home.
Interest on a home equity line of credit might even be tax-deductible. You can deduct the interest when using funds to “buy, build, or substantially improve your home,” per the Internal Revenue Service.
Potentially the two biggest advantages to a home equity line, though, are speed and cost. You can usually get a HELOC within weeks. There’s often little or no documentation required. Sometimes, you can even skip the appraisal.
Closing costs are substantially lower, too. Think, hundreds of dollars in closing costs instead of thousands with a cash-out refinance.
Cons of a home equity line of credit
The downside is that many HELOCs have variable interest rates, so your payments aren’t fixed.
It also creates a second mortgage, increasing your overall mortgage balance. This increases your “risk” as a borrower, and might make it harder to refinance your primary mortgage in the future.
Keep in mind, a HELOC is a secured mortgage just like a refinance. If you can’t keep up with the monthly payments, you risk losing your home — and your pool.
3. Home equity loan pool financing
A home equity loan is similar to a HELOC in that it’s another type of second mortgage. A home equity loan allows you to tap your home’s value and borrow cash for many purposes, including a swimming pool purchase.
But instead of accessing a line of credit on an as-needed basis, like a HELOC, you’re given a one-time lump sum of cash to pay for your pool.
Pros of a home equity loan
Many home equity loans have a fixed interest rate and payment, so your monthly cost remains predictable. This is a big benefit over a HELOC.
What’s more, a home equity loan might have a lower rate than a home equity line of credit or personal loan, too. And like a HELOC, the interest on a home equity loan might be tax-deductible.
Plus, the approval process can be faster and cheaper than a full cash-out refinance.
Cons of a home equity loan
Though cheaper than a full refinance, the downside is that home equity loans come with closing costs. Again, your house acts as collateral for the loan. So you could lose your home if you stop making payments.
4. Personal loans or “pool loans”
If you prefer financing a swimming pool without tapping your home equity, you might apply for an unsecured personal loan.
Banks, credit unions, and other financial institutions offer personal loans, and they’re sometimes advertised as “pool loans.” Once you’re approved, you’ll receive a lump sum to pay for your swimming pool.
Pros of using a personal loan
Getting funds with a personal loan is often faster than applying for a cash-out refi, HELOC, or home equity loan. The application process should be simpler. In most cases, you’ll get funds within a few days or a week.
Also, since your house doesn’t secure the loan, the bank can’t foreclose if you stop making loan payments (hopefully this doesn’t happen).
Cons of using a personal loan
The downside is that personal loans have much higher rates compared to home equity financing. So you’ll end up paying more interest over the life of the loan.
To save money on your loan, always compare interest rates among different lenders. This can help you find affordable pool financing.
Top lenders for best pool loans
Many traditional banks, credit unions, and online lenders offer swimming pool financing. Some homeowners will consider tapping their home equity to buy a pool. But others will opt for a personal loan because they’re comparatively easier to obtain.
Finding the best pool financing for your needs will involve comparing quotes with at least three lenders. When looking for a pool loan, here are some key factors to consider:
- Interest rates: Interest rates are a major factor in determining the cost of your pool loan. The lower the interest rate, the less you’ll pay in interest charges over the life of the loan. Be sure to compare rates from multiple lenders to find the best deal
- Fees: Some lenders may charge fees for origination, prepayment, or late payments. Make sure you understand all the fees associated with the loan before you sign on.
- Loan term: The length of the loan term will affect your monthly payments and the total cost of the loan. A longer loan term may result in lower monthly payments, but you’ll pay more in interest charges over time
- Loan amount: Consider how much you need to borrow to finance your pool project. Some lenders may have minimum or maximum loan amounts
- Collateral requirements: Some lenders may require collateral, such as your home or the pool itself, to secure the loan. Be sure to understand the collateral requirements before you apply
- Credit score: Your credit score will be a factor in determining your eligibility for a pool loan and the interest rate you’ll be offered. Be sure to check your credit score and address any errors or issues before applying for a loan
- Customer service: Look for a lender with good customer service and a reputation for transparency and fairness. Read reviews from other customers to get an idea of their experiences with the lender
- Discounts: Some lenders offer discounts to current customers or those who enroll in autopay. Taking advantage of any potential relationship discounts or account management markdowns can reduce the cost of borrowing
Before you shop for a pool finance loan, be sure to have a finalized pool estimate in hand. If you’re considering any additional decking or an enclosure for your new pool, then be sure those costs are included in your estimate.
Is pool financing a good idea?
Pool financing can be a good idea for some people, but whether it’s a good idea for you depends on your financial situation, your goals, and your priorities. Here are some things to consider when deciding whether pool financing is a good idea for you:
- Cost: Pools can be expensive, and financing can add to the overall cost. Before taking on debt to pay for a pool, it’s important to weigh the cost of financing against the benefits of having a pool
- Interest rates: If you decide to finance a pool, you’ll want to compare interest rates from different lenders to make sure you’re getting a good deal. A lower interest rate can save you money over the life of the loan
- Monthly payments: Pool financing typically involves making monthly payments over a period of years. Before taking on a loan, it’s important to make sure you can afford the monthly payments
- Return on investment: Having a pool can add value to your home and provide a source of entertainment and relaxation for your family. However, the return on investment may not be as high as you expect, so it’s important to consider whether the cost of the pool is worth the potential benefits
- Maintenance and upkeep: Owning a pool also comes with ongoing maintenance and upkeep costs, which can add to the overall cost of pool ownership
Ultimately, whether pool financing is a good idea depends on your individual circumstances. It’s important to weigh the costs and benefits carefully and to make sure you’re comfortable with the financial commitment involved.
Pool financing FAQ
According to Home Advisor, the average cost of an in-ground swimming pool is about $51,500. The actual cost varies depending on the type of pool, though. Concrete swimming pools cost $30,000 to $50,000; vinyl swimming pools cost $20,000 to $40,000; and fiberglass swimming pools cost $20,000 to $36,500. Keep in mind, the cost of a pool doesn’t stop with the installation. Over 10 years, you can pay an additional $5,000 to $40,000 on pool maintenance.
Some lenders, credit unions, and other financial institutions advertise swimming pool loans. However, pool loans are simply unsecured personal loans used to finance a swimming pool purchase. Personal loans have much higher interest rates than other types of financing.
A cash-out refinance might be the best way to finance a pool if you can also benefit from refinancing your mortgage. Refinance loans typically have the lowest rates compared to home equity loans and personal loans. If you prefer access to a line of credit, a HELOC is a better match. For a fixed-rate and a fixed monthly payment, you can think about a home equity loan. And if you don’t own a home — or don’t want to use your home’s equity — you can finance a pool with an unsecured personal loan.
Credit requirements for pool financing vary depending on the lender and the type of loan you use. Minimum scores might range from 600 to 680. If you want to finance a pool using a home equity line of credit or home equity loan, you may need a credit score of 720 or higher. Some lenders have lower credit requirements, so it’s possible to get pool financing with a low score. However, a lower score means you’ll get a higher interest rate and pay more for your loan.
Financing a pool is smart when you meet the credit requirements for a loan, and when you can afford the monthly payments. Keep in mind that while swimming pools are great for personal enjoyment, they don’t always have the highest return on investment. This is especially important to consider if you’re withdrawing equity from your home to finance the pool.
Getting pool financing is easier with good credit or excellent credit. Lenders will check your credit history before approving your application. If you have recent late payments or other derogatory information on your credit report, the bank may deny your application. Borrowers with a bad credit profile will find obtaining financing challenging.
Pool companies are not banks, so they don’t offer “true” in-house financing. Instead, some pool builders work with a network of outside banks and lenders to offer pool loans.
As a rule of thumb, you should be able to finance a pool with a home improvement loan. However, some types of loans limit the types of renovations financing can be used for. Check with your loan servicer for details about your specific loan.
Check your eligibility for pool financing
An in-ground pool is a big investment. So it’s important to choose the right financing option. Think about tapping your home equity to secure the lowest interest rate on your pool financing. But no matter which loan option you choose, make sure you shop around to get the best deal. Offers vary by lender, and your rate can make a big difference.